FEDERAL COURT OF AUSTRALIA

Arms v Houghton [2006] FCAFC 46

TRADE PRACTICES – appeal - consumer protection – whether employees liable for actions within scope of actual authority (other than accessorial liability) – finding of no independent trading or commercial interest by employees – error of law in considering employer liability not open for consideration

Trade Practices Act 1974 (Cth) s 52

Fair Trading Act 1999 (Vic) ss 3, 9, 10, 11, 20

Interpretation of Legislation Act 1984 (Vic) s 38

Arktos Pty Ltd v Idyllic Nominees Pty Ltd (2004) ATPR 42-005

Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8

Baschet v London Illustrated Standard [1900] 1 Ch 73

Citibank Ltd v Liu [2003]NSWSC 569

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594

Fasold v Roberts (1997) 70 FCR 489

Lauren v Jolly (unreported, Supreme Court of Victoria, 28 April 1992)

Lowe v Indoor Cricket Federation of NSW Inc (1994) ATPR 41-359

Meadow Gem Pty Ltd v ANZ Executors and Trustees Co Ltd (1994) ATPR 46-130

Raleigh v Goshen [1898] 1 Ch 73

Sibley v Grosvenor (1916) 21 CLR 469

Tobacco Institute of Australia v Woodward (1993) 32 NSWLR 559

Wong (as executor of the Estate of WONG (dec’d)) v Citibank Ltd [2004] NSWCA 396

Yorke v Lucas (1985) 158 CLR 661

SIMON ARMS v JAMES HOUGHTON and JAMES STUDENT

VID 855 of 2005

NICHOLSON, MANSFIELD and BENNETT JJ

30 MARCH 2006

MELBOURNE (via video-link)

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.                  The appeal be allowed.

2.                  The orders made by the primary judge on 8 July 2005 be varied by deleting orders 1-3 and substituting the following orders:

‘1.   There be judgment for the applicant against the respondents in the sum of $58,331.00.

 2.   The application stand over to a date to be fixed for receiving submissions on the questions of interest and costs.’

3.                  Costs reserved.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

the court:

1                     This appeal is brought against the dismissal of an application against the respondents by reason of their conduct as employees of a company WSA Online Limited (‘WSA’).  In a judgment delivered on 8 July 2005, WSA was found liable for damages in the sum of $58 331 in respect of misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 (Cth) (‘the TPA’).  The same judgment dismissed an application against the present respondents in respect of a claim pursuant to s 9 of the Fair Trading Act 1999 (Vic) (‘the FTA 1999’). 

background facts

2                     In 1999 the appellant proposed to establish a business of providing a market service for small to medium independent wineries by means of a website on the internet under the name ‘auscellardoor’ (‘the Original Concept’).  The method of operation was to be as follows:

(a)                retail purchasers would identify and purchase wines from participating vendor wineries through the auscellardoor website.

(b)               payment for the wine would be made online by credit card processed through an ‘e-Gate’ facility on the website provided on behalf of the ANZ Bank by the appellant.

(c)                the vendor wineries would be credited with the purchase directly into the account of the vendor winery, after deduction of a small transaction charge (estimated to be between 2 per cent and 2.5 per cent).

(d)               the vendor wineries would pay auscellardoor a commission of 5 per cent on each sale effected through the website.

The Original Concept did not require payment of sales tax on ‘cellar door sales’.

3                     WSA provided services to the appellant in respect of the Original Concept.  Prior to the appellant contracting with the vendor wineries, WSA represented to the appellant that the vendor winery would not be required to do anything more to become an ANZ e-Gate merchant than to complete the documents in a Trade Presentation Kit and, in particular, to complete the ANZ form with certain banking details.  This representation was said by the appellant to arise from two sources.  First, a statement on 7 February 2000 by the respondents that wineries could be added to the website by simply filling in a form and paying a small setup fee.  Second, approval by the respondents on behalf of WSA of the form in a Trade Presentation Kit in March 2000. 

4                     In reliance on the representations, the appellant proceeded to travel around Australia signing up wineries on the basis that all that was required of vendor wineries to be added to the website and receive payments through the ANZ e-Gate facilities was to sign the simple form.  However, as the respondent Student disclosed to the appellant on 23 June 2000, he would have to arrange for each winery to become a merchant and the procedure for the vendor wineries to become ANZ e-Gate merchants ‘was far from simple’.  It required more of an applicant by way of provision of financial statements and projections and company or partnership details, together with accreditation by ANZ Bank, Diners Club and American Express, acceptable profit and loss statements for the last two years and a business plan. 

5                     At that time, acting to establish the Original Concept, the appellant had already enrolled about 30 wineries and the website was to be launched within five days.  It therefore was impossible for him to require wineries to comply with the conditions necessary to become individual merchants.  Consequently, he was forced to make an urgent application for auscellardoor to become an accredited merchant.  He operated the business as follows (‘the Interim Arrangement’):

(a)                auscellardoor was to become a retailer of wine offering to the public the wines of the vendor wineries with whom he had contracted.

(b)               auscellardoor would purchase the wines from the vendor wineries.

(c)                auscellardoor would charge a mark up or commission limited to 5 per cent.

(d)               Purchases would be by the ANZ by Mastercard, American Express or Diners Club facilities of auscellardoor and auscellardoor would be liable for the associated transaction fees.

(e)                As the sale would be effected by auscellardoor as retailer and not by the vendor wineries, the sales would not be ‘Cellar door’ sales and sales tax would not be avoided, as was the Original Concept.

On this basis the business was not viable but the appellant was required to maintain the Interim Arrangement for 12 months to preserve his credibility and goodwill. 

6                     From late 2001 the appellant was able to change to his current business structure (‘the Current Business Structure’) which involved establishing a supply network of distributors and wineries, purchasing wines, principally from distributors, and selling on a retail basis.  He rapidly built up a number of wineries on the website and, at the time of the trial, had about 137 wineries listed on it.

7                     It was in these circumstances that in the application before the primary judge declarations were sought against the present respondents that they ‘were or have been directly or indirectly knowingly concerned in or party to’ the alleged contraventions by WSA.  By order of the primary judge made on 8 August 2003, the appellant as applicant was given leave to file an amended statement of claim.  The reasons of his Honour delivered on 8 August 2003 held that the claim for accessorial liability was not open on the evidence but admitted the possibility of the appellant as applicant adding a claim under the FTA 1999.  As a consequence the amended statement of claim was filed.  It added a pleading, in lieu of the claim for accessorial liability, of a claim made in reliance on s 9 of the FTA 1999. 

8                     It was that application in respect of the respondents to this appeal which was dismissed and against which this appeal lies. 

reasoning of primary judge

9                     The essential reasoning of his Honour in relation to the issue of the liability of the respondents is set out in the following paragraphs from his reasons:

‘107     It is significant that although s 9 of the [FTA 1999] and its counterparts in the legislation in other States have been in force for about two decades, the researches of Counsel have not revealed a single authority where an employee has been held personally liable for statements made in the course of his or her employment by an employer who, or which, was concededly engaged in trade or commerce. I except from that observation the accessorial liability of an employee under eg, s 75B(1) of the TPA.

108      An attempt to fix Student and Houghton with that kind of liability has been expressly abandoned in the present case.

109      The consideration just indicated together with my own analysis in the light of the authorities of the common basis on which liability for deceptive or misleading conduct "in trade or commerce" is erected by both the TPA and the [FTA 1999] has led me to conclude that it does not extend to the conduct of Student or Houghton in the present case. That is not to say that a director or sole shareholder of a company may not attract liability for statements made in the course of the company´s business if their making can be characterised as tending to promote the director´s or shareholders own trading or commercial interests. See eg Arktos v Idyllic Nominees Pty Ltd [2004] FCAFC 119; (2004) ATPR 42-005. However, no independent trading or commercial interest can be imputed to Student or Houghton in the present case. The application against those respondents must therefore be dismissed.’

10                  The reasoning of his Honour was preceded by consideration of case law, most of it directed to whether the activities of the respondents were ‘in trade or commerce’.  While that issue is not at the core of this appeal, it is necessary to set out the context in which his Honour arrived at the views which he expressed in [107]-[109] of his reasons.

11                  His Honour commenced by saying that on behalf of the (present) respondents the contention had been advanced that as employees they were not engaged in trade or commerce as required by s 9 of the FTA 1999.  He accepted that the intention of the FTA 1999 was to be gleaned from the Second Reading Speech on the Bill which became that Act; that is, to extend the prohibition in the TPA to ‘non-corporate traders – that is individuals and partnerships – trading within Victoria’. 

12                  In support it had been put to his Honour that engagement in ‘trade or commerce’ was said to have the same meaning in both the FTA 1999 and the TPA as that ascribed by Mason CJ, Deane, Dawson, Gaudron JJ (with Toohey J relevantly agreeing) in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604.  There it was stated that s 52 of the TPA:

‘is concerned with … the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character’.

He recorded also that counsel for the present appellant contended that the present respondents’ personal conduct occurred ‘in trade or commerce’ and was said to follow from the fact that they were as individuals engaged in offering and supplying services to the present appellant ‘in the course of business’.  His Honour noted however that the ‘business’ was that of a company (WSA) not of the present respondents. 

13                  His Honour turned to Tobacco Institute of Australia v Woodward (1993) 32 NSWLR 559 which it had been submitted did not avail the present respondents because it was based on an acceptance that the defendant’s corporate employer was not itself engaged in trade or commerce.  It was said to be ‘not suggested that, if the corporate employer had been acting in trade or commerce, the [defendant’s] statements would not have been made in trade or commerce’.  His Honour added, however, that the corollary there indicated does not entail that the defendant’s statements, if made in the course of his employment would have been made in trade or commerce in which he was personally engaged. 

14                  In relation to the reliance for the present appellant on Concrete Constructions, his Honour said that the question was not whether the person was acting ‘in trade or commerce’ but whether he or she was so acting on his or her own behalf or solely as employee or agent of another:  Concrete Constructions at 613 per Toohey J.  His Honour referred to Meadow Gem Pty Ltd v ANZ Executors and Trustees Co Ltd (1994) ATPR 46-130 at 53-631 where Hedigan J had accepted that Beach J in Lauren v Jolly (unreported, Supreme Court of Victoria, 28 April 1992) had rightly construed the passage in Concrete Constructions at 604 as being authority for the proposition that the conduct in question does not have to be conduct in connection with one’s own business and it would be sufficient if the conduct engaged in was for the purpose of promoting the business of some other person or corporation.  His Honour said, however, that in both Meadow Gem and in Lauren the statements made were arguably for the purpose of promoting the interests of the company when no relationship of employment or agency existed between the makers of the statements and the company so that the statements were made on their own behalf and in connection with their own ‘business’ or in discharge of what was perceived to be the personal duty as Ministers of the Crown. 

15                  His Honour also referred to Fasold v Roberts (1997) 70 FCR 489 where Sackville J reviewed earlier authorities and at 531 distilled the following propositions as shedding light on the test formulated by the High Court in Concrete Constructions:

‘(i)       A person undertaking public presentations, such as exhibiting films or publishing advertisements, engages in conduct in trade or commerce if the presentations are designed to advance or protect the commercial interests of the exhibitor or the publisher, or of trading entities represented by the exhibitor or publisher: Glorie [v WA Chip & Pulp Co Pty Ltd (1981) 39 ALR 67; 55 FLR 310]; Tobacco Institute v AFCO [(1992) 38 FCR 1; 111 ALR 61;

(ii)       Altruistic motives will not necessarily prevent the public presentation being in trade or commerce, depending on the other circumstances of the case: Glorie.

(iii)      A person may make public statements designed to influence trading patterns, yet not make those statements in trade or commerce. Even statements designed to persuade people to buy a particular commodity, if made by a government representative, are not necessarily made in trade or commerce: Kerin [Unilan Holdings Pty Ltd v Kerin (1992) 35 FCR 272; 107 ALR 709].

(iv)      Public statements by a person not engaged in trade or commerce himself or herself, may be made in trade or commerce if designed to encourage others to invest, or continue investments, in a particular trading corporation: Meadow Gem [v ANZ Executors & Trustees Co Ltd (1994) ATPR (Digest) 46-130].´

His Honour said that what was said in par 1(iv) was not to be taken as having endorsed the proposition that any statement made by an employee which is made in trade or commerce will be taken to have been made by the employee on his or her own behalf.

16                  It was in that context that his Honour then proceeded to [107]-[109] of his reasons.

relevant provisions of the fair trading LEGISLATION (Vic)

17                  To address the appeal it is convenient to commence by examining the legislative provision on which the application against the respondents was brought and to consider it in its legislative context. 

18                  The date at which the earliest representation was said to have been made by the respondents was 7 February 2000.  Consequently, the relevant date for the application of the law is at that time.  The FTA 1999 was then in force.  It is important to read that Act as it stood at the relevant date and not as it stood after amendment by the Fair Trading (Amendment) Act 2003 (Vic) (‘the FTAA 2003’).

19                  When the FTA 1999 was a Bill before Parliament the Minister’s Second Reading Speech stated:

‘The reason for the introduction of the existing Fair Trading Act 1985 in Victoria was pursuant to an agreement between all states to extend the coverage of laws prohibiting a wide range of deceptive or misleading practices based on relevant provisions of the commonwealth’s Trade Practices Act 1974 to non-corporate traders – that is, individuals and partnerships – trading within Victoria over which the Trade Practices Act has no jurisdiction.  Both the Fair Trading Act 1985 and the Trade Practices Act have coverage over corporate traders trading within Victoria and Victorian-based corporate traders trading outside Victoria.  The new Fair Trading Bill continues this coverage.

In pursuit of uniform fair trading legislation across Australia, drafting of provisions in the Fair Trading Bill has been modelled where possible on the relevant provisions of the Trade Practices Act.’

20                  The purposes of the FTA 1999 were expressed in s 1 as follows:

‘1.        Purposes

            The main purposes of this Act are –

(a)               to promote and encourage fair trading practices and a competitive and fair market;

(b)               to regulate trade practices;

(c)               to provide for the safety of goods and services supplied in trade or commerce and for the information which must be provided with goods or services supplied in trade or commerce;

(d)               to regulate off-business-premises sales and lay-by sales;

(e)               to provide for codes of practice;

(f)                to provide for the powers and functions of the Director of Consumer and Business Affairs Victoria including powers to conciliate disputes under this Act and powers to carry out investigations into alleged breaches of this Act;

(g)               to repeal the Consumer Affairs Act 1972, the Ministry of Consumer Affairs Act 1973, the Fair Trading Act 1985 and the Market Court Act 1978.’

21                  Section 9 of the FTA 1999 read:

‘9(1)    A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 

  (2)     Nothing in the succeeding provisions of this Part is to be taken as limiting by implication the generality of sub-section (1).’

22                  Section 9 appeared in Pt 2 dealing with ‘Unfair Practices’.  It was one of three sections addressing misleading conduct.  Section 10 addressed misleading conduct in relation to goods and s 11 addressed misleading conduct in relation to services.  Each of them was made referable to ‘a person’.  Section 20 also addressed misleading representations about certain business activities and was likewise referable to ‘a person’. 

23                  The word ‘person’ was not defined in s 3 of the FTA 1999.  However, s 38 of the Interpretation of Legislation Act 1984 (Vic) defined ‘person’, subject to the appearance of any contrary intention, to include ‘a body politic or corporate as well as an individual’.  No relevant contrary intention appeared in s 9 of the FTA 1999.

24                  Examination of the FTA 1999 discloses multiple use of the words ‘person’ and ‘corporation’.  Relevantly, s 3 defined ‘officer’ to mean:

‘(a)      in relation to a body corporate which is a corporation within the meaning of the Corporations Law, has the same meaning as in section 82A of that Law; and

 (b)      in relation to a body corporate which is not a corporation within the meaning of that Law, means any person (by whatever named called) who is concerned in or takes part in the management of the body corporate and an employee of the body corporate;’  (emphasis added)

The word ‘employee’ was used in Pt II addressing ‘Enforcement and Remedies’ both directly and indirectly by reference to the definition of ‘officer’.  In connection with imputing a state of mind to bodies corporate s 144 provided:

‘144     If, in any proceedings for an offence against this Act, it is necessary to establish the state of mind of a body corporate in relation to particular conduct, it is sufficient to show that-

(a)               the conduct was engaged in by an officer or agent of a body corporate within the scope of his or her actual or apparent authority; and

(b)               the officer or agent had that state of mind.’

This is similar in its terms to s 84(2) of the TPA which reads:

‘(2)      Any conduct engaged in on behalf of a body corporate:

(a)               by a director, servant or agent of the body corporate within the scope of the person’s actual or apparent authority; or

(b)               by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent;

shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.’

25                  The word ‘employee’ also appeared in two sections in the FTA 1999 relating to prosecution for offences under the Act:  s 145 and s 155.  The former had the effect for that purpose of (a) imputing to a body corporate employer engagement in the conduct of the ‘officer or agent’ unless established it had taken reasonable precaution and exercised due diligence and (b) imputed the same to a person other than a body corporate subject to the same exculpatory condition.  The latter section excepted from defences reliance on actions of an employee.  Being related to prosecutions, neither of these references have any relevant contextual effect here.

26                  As the above reference to s 1(g) of the FTA 1999 makes apparent, the FTA 1999 was preceded by the Fair Trading Act 1985 (Vic) (‘the FTA 1985’).  The latter Act contained in s 31 the equivalent of s 75B of the TPA providing for accessorial liability in respect of persons involved in a contravention of Pt II.  This is the provision which in its trade practices form was held by the High Court in Yorke v Lucas (1985) 158 CLR 661 to require the person in respect of whom accessorial liability is alleged to be shown to have had knowledge of the essential elements of the contravention, whether or not that person knew that the matters amounted to a contravention so that the person was in that sense an intentional participant. 

27                  When the FTA 1999 was enacted no section providing for accessorial liability was included.  Such section was not reintroduced until the FTAA 2003.  Theconsequence is that the FTA 1999 in which the relevant s 9 appears, did not emulate the trade practices legislation by including a provision in terms of s 75B of the TPA. 

nature of the appeal

28                  The notice of appeal asserts that his Honour ‘erred’ in concluding as he did in respect of the respondents and in failing to find they engaged in misleading or deceptive conduct in contravention of s 9 of the FTA 1999.  No identification is made in the notice of appeal whether the error is one of law or fact or mixed law and fact.  However, counsel for the appellant said that, if necessary, the notice of appeal could be amended to specify that the error relied upon was one of law alone. 

29                  The error of law contended for by the appellant is that his Honour erred in principle when he found that an employee would not be held personally liable for statements in the course of his or her employment by an employer who, or which, was concededly engaged in trade or commerce (excepting from that categorisation instances of accessorial liability).  This submission is advanced on the basis that if this Court finds that the correct view is otherwise in law, the relevant finding of his Honour should be reversed by this Court.

30                  For the respondents it is submitted that the finding is one of fact and is not simply conditioned by the view of the law taken by his Honour.  However, the respondents accept that if the law is otherwise than stated by his Honour, there is no residue of law on the issue in this appeal which would require the matter to be remitted to him.

examination of case law

31                  The view which his Honour reached on the issue of law made relevant by this appeal was based on the paucity of authority relating to employees attracting personal liability for statements such as those in issue here.  The appellant contends there is established authority and that his Honour failed to take it into account.  The respondents contend that the authority may be distinguished from the present circumstances.  It is necessary therefore to turn to the relevant case law including the authorities cited by his Honour. 

32                  In Arktos Pty Ltd v Idyllic Nominees Pty Ltd (2004) ATPR 42-005, a Full Court (Carr, Tamberlin and Nicholson JJ) considered the actions of a director of a vendor company in connection with the sale of a business.  The director gave to purchasers financial statements of the business prepared by its accountants together with a handwritten memorandum of his to the effect that the financial statements understated the true profits.  At trial it was held that the vendor company had engaged in misleading or deceptive conduct.  Such claims against the directors as accessories and under the Fair Trading Act 1987 (WA) (‘the FTA (WA)) were dismissed.  The primary judge held that the directors could not be liable under the FTA (WA) because it had not been alleged that they engaged in conduct in ‘on their own account’.  However, in the Full Court this decision was reversed in respect of the director who had written the memorandum.  The members of the Court said:

‘[13]   The authorities show that a director of a corporation who acts on its behalf in the course of trade or commerce also acts himself or herself in trade or commerce and, if the corporation is liable under a State Fair Trading Act for their conduct, they also attract primary liability under the same statute: Cleary v Australian Co-operative Foods Ltd (1999) 32 ACSR 701 at [54]-[57]; Lauriana Pty Ltd v Corfield Food Warehouse Pty Ltd, unreported, Supreme Court of Western Australia, Wallwork J, 28 April 1995 at 6 and 22; Citibank Ltd v Liu [2003] NSWSC 569 at [53] and the cases there discussed, and Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525 at 541.  That is supported in particular by the provision in s 84(2) of the TPA and s 82(2) of the FTA that conduct engaged in on behalf of a body corporate by a director within the scope of actual or apparent authority is deemed ‘also’ to have been engaged in by the body corporate.  It is not correct, as the case for the third respondent asserted, that the principle recognized in these authorities is applicable only when there is a finding of ‘separate conduct’ by the director; that is, conduct other than in the capacity of director or agent.  It is accepted in J D Heydon, Trade Practices Law, Law Book Company, Sydney, 1989 at 18.350 that corporate officers acting in the course of their employment, or in the scope of their authority as agents causing the corporation to be liable under s 84(2) also have personal liability.  It is added there that in normal circumstances such officers will be knowingly concerned in the conduct: s 75B(c).’

33                  The decision in Citibank Ltd v Liu [2003]NSWSC 569 concerned the general manager of a company who had signed, on its behalf, drawdown notices to a bank which certified certain matters necessary for a lease of finance to the company.  The drawdown notices contained false representations.  It was not established that the general manager knew this.  For this reason he was held not to be liable for accessorial liability under s 75B of the TPA or for deceit.  However, he was held directly liable under s 42 of the Fair Trading Act 1987 (NSW), the equivalent of s 9 of the FTA 1999.  In the course of his reasons Hamilton J said that it had not been asserted or argued that any conduct of the defendant was not in trade or commerce.  In his view that was correct and for this he relied on Concrete Constructions at 612-614 per Toohey J and Lowe v Indoor Cricket Federation of NSW Inc (1994) ATPR
41-359 at 42,691- 42,692 per Burchett J. 

34                  Turning to the issue of misrepresentation, Hamilton J said it had long been established that the liability of an agent for a fraudulent misrepresentation is not precluded by the fact that it has been made on behalf of the principal so that, if the agent participated in the fraud, he or she is liable for it:  Sibley v Grosvenor (1916) 21 CLR 469 at 479.  He continued at [53]:

‘[53]   In my view, no difference is made to the application of the principle by the fact that the representor on behalf of a corporation is an employee.  The fact that he is an employee does not negative the fact that he is acting as an agent.  That the FTA may impose liability on employees acting as such is illustrated by Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8.  That was a case under the TPA but, as the conduct involved telephone communications, the provisions bound natural persons as well as corporations.  The injunctive orders were made by consent, but French J scrutinised them carefully to see that they were authorised by the Act (see at 21).  His Honour made orders against the employee who had engaged in the conduct.  In Pricom Pty Ltd v Sgarioto (1994) ATPR (Digest) 46-135, a case under the Victorian FTA, Eames J held an estate agent liable for misleading conduct although his principals selling their own house could not be held liable because not engaged in trade or commerce.  The FTA proscribes conduct by natural persons.  If that conduct is in trade or commerce and cannot be said not to be misleading conduct of the person who engages in it by reason that that person is acting merely as a conduit, in my view the person is not removed from the purview of the Act by the fact that he is engages [sic] in the conduct as the employee of another’.

35                  The decision in Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8 was one where French J accepted at [31] that declaratory relief sought against Ms McCaskey in relation to ss 52 and 53(g) of the TPA involved representations in relation to which it had been admitted by her she had made them in telephonic contacts.

36                  The appeal from the decision in Citibank - Wong (as executor of the Estate of WONG (dec’d)) v Citibank Ltd [2004] NSWCA 396 - was the subject of a judgment of the Court of Appeal in New South Wales delivered on 3 November 2004, after the decision in Arktos, which had been delivered on 10 May 2004.  The reasons of the Court of Appeal were delivered by Beazley JA, with whom Sheller and Bryson JJA agreed.  At [19] Beazley JA said:

‘[19]   But in any event, his Honour’s acceptance that relief could be granted against an employee for breach, in that case of s 52 of the Trade Practices Act, is clearly correct.  As a matter of law, an employee acts as agent for the employer.  There is no basis in principle why different rules should apply to agents who are appointed in different circumstances.  Provided that a party alleging the contravention is able to establish that the agent is liable within the principles stated in Yorke v Lucas, then liability under the section attaches, notwithstanding that the agent in question is an employee acting within authority in the course of employment.’

37                  Her Honour said that in relation to the first issue of whether the appellant Wong had not engaged in conduct that was deceptive or misleading but had merely been a conduit for the passing on of information in respect of the transactions, Hamilton J had found that the representations were those of the appellant.  She said that it was correct that he had approached that question from the perspective of whether the relevant bank officers would have considered that the representation had been made by the appellant as opposed to being representations by the company.  As her Honour said, the question whether a person is merely a cipher or a conduit for information and does not adopt the information in a way that makes it that person’s own, is a question of fact. 

38                  The position at law therefore is that authorities both in the Full Court of this Court and in the Court of Appeal of New South Wales assert that, in the appropriate circumstances, a employee can be found to have engaged in misleading or deceptive conduct for actions taken within the scope of his actual authority; that is, not independently of such authority. 

reasoning

39                  From a careful examination of his Honour’s reasons, particularly [107]-[109], we consider that the correct understanding of them is that he dismissed the claim against the present respondents because he did not consider it was open to him at law to find that an employee acting within the scope of his or her actual authority could also be liable under s 9 of the FTA 1999 (or other similar provisions).  His finding in [109] was clearly a finding of fact.  However, his finding there that the present respondents could not be imputed with any ‘independent trading or commercial interest’ was peripheral to the central issue whether they could be liable for their acts within the scope of their actual authority.  Therefore we accept the appellant’s submission that the issue on the appeal is whether there was an error of law in his Honour’s reasoning on that issue.

40                  At the date his Honour delivered his judgment (8 July 2005) there were in existence decisions at appellate level in Arktos and Wong in which the principle of the possibility of employee liability for acts in trade or commerce within the scope of actual authority had been accepted.  As in McCaskey at primary level, those appellate decisions had accepted the principle because there was no perceived basis in principle to distinguish the liability of an employee from that of a director in the relevant context.  It follows therefore that, as his Honour perceived the law to be to the contrary, he was in error of law.

41                  The primary submission for the respondents was that such could not be the case because all the authorities relied on by the appellant either concerned instances where the conduct in trade or commerce of the employee was not argued or were concerned with the conduct of a director.  However, in the course of oral argument counsel for the respondents conceded the former was not the case in the light of Citibank at [8].

42                  The acceptance of the principle of possible employee liability in the circumstances considered in these reasons has not yet been considered by the High Court.  If there are reasons upon which to distinguish the position of an employee in that respect from a director, they have not been articulated either by the Full Court in Arktos, the Court of Appeal in Wong or in argument before this Court.  Further, it is a position which is consistent with the common law liability of an employee for tort when acting bona fide within the course of employment on the employer’s orders:  Baschet v London Illustrated Standard [1900] 1 Ch 73; Raleigh v Goshen [1898] 1 Ch 73 at 77.  It also avoids any imprecision which would follow from a distinction between directors and shareholders on the one hand and employees on the other when the principle was required to be applied to employees on share incentive schemes or on commissions, wholly or in part.

43                  Furthermore, if there were some foundation in principle it would not appear to be likely to be germane in the context of s 9 of the FTA 1999.  That provision is to be understood in the context of its enacted objectives as explained by the Minister and in the absence from that Act of any provision for accessorial liability which might arguably be utilised to provide a foundation for argument that the statute should be otherwise construed.

44                  For the same reason, there are no circumstances which suggest the decisions in Arktos and Wong are clearly and plainly wrong so that this Court should not follow them.  In our view, those decisions state the applicable principle.

45                  In written submissions the respondents urged that the reference in s 9 of the FTA 1999 to ‘in trade or commerce’ should be construed in the sense propounded by the majority and Toohey J in Concrete Constructions at 604.  Further, they contended that such being the case, the central conception was not to make employees such as the respondents liable under the section.  However, Concrete Constructions was concerned with whether specific conduct was ‘in trade or commerce’ rather than in the identity of the person engaged in it. This case concerns the latter issue (which did not arise in Concrete Constructions) and there is binding authority on that question.

46                  Section 84(2)(a) of the TPA refers to ‘the scope of the person’s actual or apparent authority’.  The respondents relied on this phraseology in pressing the argument that an employee could only be engaged in trade or commerce when acting independently of such scope in trade or commerce.  It is not clear why the respondents would seek to protect actions in apparent authority by the principle which they urged.  It is not necessary for us to consider it in the light of the facts at issue in this appeal.

conclusion

47                  It is common ground that in the event of the error of law being made out, there is no reason for this Court to remit the matter to the primary judge.  This is because the findings are complete on the issue of the actions taken by the respondents in the scope of their actual authority.  Consequently the appeal should be allowed and the orders of his Honour varied to give effect to this result.

Associate:

Dated:              30 March 2006